Ministry of Finance was planning to launch program only in August, but managed to include matter in bill Chamber of Deputies passed on Friday
Gabriel Leal de Barros — Foto: Leo Pinheiro/Valor
The Ministry of Finance managed to include in the last minute in a bill passed Friday by the Chamber of Deputies a new tax settlement program that could increase federal collection by next year.
The program could potentially increase federal revenues by R$34 billion, sources say. The effort, internally called “Transação 2.0,” is aimed at settling legal and administrative battles and could help increase the tax base, especially to create the conditions for the government to comply with the primary result targets provided in the new fiscal framework.
The proposal was being drafted by the economic team and would be launched in August with the unknown package prepared by Finance Minister Fernando Haddad’s team to increase federal collection, but the ministry saw an opportunity window to include it in the bill passed Friday. The device will allow companies fined by the tax authority that are discussing cases in the Administrative Council of Tax Appeals (CARF) or in the courts to negotiate new payment conditions.
The discount, originally capped at 50% of the total value, can now reach 65%. The payment term has also been extended to 120 months from 84 months. The rebates may be exempt from taxation. The bill will now be analyzed by the Senate.
From a fiscal standpoint, according to preliminary calculations of members of the economic team, the government would be able to collect up to R$34 billion with the program this year and the next ones. They recalled that it is a one-time revenue, since its potential will depend on the voluntary adherence of taxpayers. The government wants to reach a deficit of about R$90 billion by the end of this year, and has the ambitious plan of reducing to zero the deficit in the public accounts by 2024, as well as generating surpluses as of 2025.
Despite the fact that this is a one-time primary revenue, both members of the Ministry of Finance and public accounting experts say that the amount, even if it is a temporary windfall, could be important for Mr. Haddad’s plans, especially at a time when tax collection could fall because of the stronger real and the drop in commodity prices. They also warn that some measures that increase revenue on a recurring basis may take time to reach their potential.
Another change brought about by the new model is that companies can negotiate a single case. They no longer have to waive the entire tax argument, including future cases. This, according to one source, made the process “too bureaucratic.”
The Ministry of Finance will still inform which issues will be opened for settlement, but taxpayers can submit suggestions. Another novelty is that the Central Bank can make tax settlements with financial firms.
This is a broader model for negotiation than the one that exists today, which was a request from the Federal Attorney General’s Office (AGU) to the Ministry of Finance. The idea for the proposal had been in the works since the first tenders for dispute resolution were launched, and one of them, for goodwill cases, was not as well received as expected. After hearing the taxpayers’ points, the government started to study how to improve it.
Another incentive for the initiative was the government’s recent victory in the Federal Supreme Court related to taxation of financial income of financial firms. After the defeat, the banks sought the Attorney General’s Office of the National Treasury (PGFN) to try some kind of debt installment plan or even a settlement.
At the Ministry of Finance, there was an interpretation that it did not make sense to do settlements with banks, since the mechanism is based on credits that are difficult to recover and debtors with compromised ability to pay. This is not the case of the financial system, which can offer a guarantee for the amounts. At the same time, however, officials in the ministry believe that some other instrument could meet the needs of financial institutions and other large taxpayers.
Since 2019, with the current model of tax settlement, more than 2 million agreements have been signed with taxpayers. There are 250,000 agreements in monitoring, a number that could increase with the new rules.
Until Friday, the possibility of settlement was included in the CARF bill by the rapporteur Beto Pereira, but only through the Federal Revenue, which caused unease in the economic team.
The Forum of Federal Public Defenders, which represents federal public defenders and attorneys of the National Treasury, even released a note pointing out the lack of “constitutional competence” of the Federal Revenue to make settlement agreements without the “participation or authorization” of a federal public defender.
After negative reactions, the rapporteur excluded settlements with the tax authority. Nevertheless, Isac Moreno Falcão Santos, president of Sindifisco, the union that represents civil servants working for the tax authority, argues that the settlement would be more effective before the constitution of the credit, and therefore auditors will insist on a new project for the exclusive settlement with the Federal Revenue.
Tax specialist Breno Vasconcelos, a partner at the Mannrich e Vasconcelos Advogados law firm, said the new model is positive, since it allows the negotiation of specific cases. “In practice, large taxpayers are currently unable to negotiate their cases due to the lack of discounts and special conditions for those with high solvency ratios,” he said.
“Thus, the creation of the counterpart of abandoning certain lawsuits in which the government has an unfavorable prognosis would certainly make the settlements more attractive to large companies, consequently increasing tax collection for the federal coffers,” he said.
The tax specialist also points out “the need for the design of this new settlement to bring clear criteria on how the cases to be subject to waiver as a counterpart will be selected, both to avoid discretionary decisions and to ensure isonomy.”
From the fiscal standpoint, economist Gabriel Barros, a partner at Ryo Asset and a former director of the Independent Fiscal Institution (IFI), believes that even if the revenue from the new settlement program is non-recurring, it would be positive “as guidance for achieving the primary targets, which are challenging.”
“Economic activity is slowing down and there has been a clear decline in commodities, which will hit and reduce the primary revenues of the government. So, finding a way to compensate, even through a one-time collection, is a favorable aid,” he said.
The AGU confirmed that a refinement of tax settlements is being discussed. In addition, it said, the idea is to improve the mechanism to make the settlement easier. Besides the R$34 billion with the new program, the government also projects an annual collection of between R$40 billion and R$50 billion per year with the return of the vote. The Finance Ministry declined to comment.
(Raphael Di Cunto contributed to this story)
*Por Guilherme Pimenta, Beatriz Olivon — Brasília
Source: Valor International